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US DoJ publishes some of its evidence against MegaUpload

By Chris Cooke | Published on Tuesday 24 December 2013

Since its audacious swoop on the Mega empire at the start of 2012, which took the popular file-transfer and video-sharing platform offline with next to no warning, the US Department Of Justice has been relatively quiet about its case against the former digital business.

Certainly when compared to MegaUpload founder Kim Dotcom, who has routinely spoken out against the criminal case being amassed against him and his former company, claiming that all allegations of copyright infringement are unfounded, that his prosecution is the result of an unholy alliance between Hollywood moguls and America’s political establishment, and that raids on his home in New Zealand were unlawful. Though on that latter point at least, Dotcom has a point.

Anyway, last week the US DoJ unsealed a big batch of its evidence against Dotcom and the Mega masses. The 191-page report reasserts the American government’s claim that Dotcom et al participated in rampant copyright infringement, racketeering and money laundering by running a business that generated $150 million in subscriptions and $25 million in ad revenue, much of it secured because of the access MegaUpload gave to vast amounts of unlicensed TV, movie and music content.

And while some people will have used MegaUpload and MegaVideo to store and share legitimate files – ie content that they created and owned – prosecutors argue that most of the traffic on the site was linked to copyright infringing videos.

According to The Verge, the DoJ report claims that of the 14.9 million videos on MegaVideo at the point of shutdown, only 8.6 million had ever been viewed, and of those 12.8% had been the subject of a takedown request from a rights owner via the system set out in the US Digital Millennium Copyright Act. But, while the content that we know was infringing copyright may have accounted for a minority of the overall files stored on the Mega platform, it accounted for 43% of all MegaVideo views.

Of course, the fact that MegaUpload accepted DMCA takedown requests from rights owners, and seemingly did respond to them, at least sometimes, is a key part of Dotcom’s defence, because that bit of law is supposed to provide protection for the operators of platforms used by others to infringe copyright, providing they operate a takedown system.

But, says the DoJ report, MegaUpload operated a deliberately shoddy and misleading takedown operation, removing only content stored at any specific URL identified by a rights owner, and ignoring the fact that multiple people had usually uploaded the same movie, TV show or music video, and that each upload would have a different URL. So that Mega could claim to have acted on a takedown notice, but could still offer the infringing content to its paying users.

Of course, US courts have in the past generally been willing to accept similarly shoddy takedown systems as sufficient to grant the operators of user-upload services ‘safe harbour’ protection from infringement claims. But prosecutors hope to distinguish MegaUpload, partly because of its Uploader Reward scheme, which provided financial incentives to those who uploaded the most content, oblivious of their right to do so.

That scheme, the DoJ’s report says, meant that MegaUpload management couldn’t be blind to the rampant infringement being committed on their servers, because they were actively monitoring the upload of blatantly infringing content, so to reward the infringers. The DoJ papers include correspondence between Mega bosses about one particularly prolific uploader that show that they saw him as an important contributor to their business, even though he was clearly using the Mega platform to infringe.

Keen to stress the point that Team Mega should not get safe harbour protection from the DMCA, the report lists a number of reasons why this case is different, including that Mega management were “wilfully infringing copyrights themselves; they have actual knowledge that the materials on their systems are infringing; they receive a financial benefit directly attributable to the copyright-infringing activity; they failed to terminate repeat infringers; and they have not removed, or disabled access to, known copyright-infringing material from servers they control”.

Needless to say, Dotcom’s legal reps, still fighting efforts to extradite the Mega man to the US, have hit out at the report, arguing that while there might be a civil case for the former MegaUpload business to answer, if the movie studios were to sue (which they almost certainly will), the allegations are not sufficient to warrant a criminal prosecution. The distinction is important, because if criminal charges were dropped Dotcom couldn’t be extradited, or jailed, and the aforementioned safe harbour clauses of the DMCA could apply.